Petco Health & Wellness experienced a significant blow as its stock value plummeted by 25% following an unexpected loss and a decline in consumer spending. In the third quarter, Petco reported a loss of five cents per share from a revenue of $1.49 billion. This fell short of analysts’ expectations, who predicted earnings of two cents per share on a revenue of $1.51 billion.
Comparatively, in the same period last year, Petco had reported earnings of 16 cents per share with revenues totaling $1.5 billion.
Expressing his disappointment, Chief Executive Ron Coughlin acknowledged that the company’s third-quarter results were below expectations due to the challenging consumer climate. However, Coughlin assured that Petco would respond swiftly to address the issue.
As part of their strategic response, Petco plans to introduce the largest national cat and dog food value brands to cater to the diverse needs of pet owners and generate incremental profits over time.
During a call to discuss the results, Petco management revealed that many customers are opting for more affordable pet products amidst rising inflation and high interest rates.
In light of these circumstances, Petco revised its earnings forecast for fiscal 2023 to eight cents per share, down from the previous estimate of 24 to 30 cents per share.
Echoing the concern, Evercore ISI analyst Oliver Wintermantel commented that the downgraded guidance is a result of persistent softness in discretionary item sales. This unexpected downgrade is anticipated to further intensify pressure on the company’s stocks.
As a consequence of these developments, Petco’s shares witnessed a staggering 25% decline, reaching $2.87 by late morning. This drop marks the largest percentage decline in the company’s history, potentially leading to a record-low closing price, according to Dow Jones Market Data.